Employment at Will Doctrine in Texas

For well over a century, the general rule in the State of Texas, as in most American jurisdictions, has been
that absent a specific agreement to the contrary, employment may be terminated by the employer or the
employee at will, for good cause, bad cause, or no cause at all. Montgomery County Hospital District v.
Brown 965 S.W.2d 501, 502 (Tex. 1998) (citations omitted).

As the Texas Supreme Court stated in Brown “the employer must unequivocally indicate a definite intent to
be bound not to terminate the employee except under clearly specified circumstances” for the at-will
relationship to be altered. 965 S.W.2d at 502.

CASES

Coleman v. Revak (Tex.App.- Houston [1st Dist.] June 19, 2008)(Hanks) (employment at will)

Morse Wholesale Paper Co. v. Talley (Tex.App.-Houston [14th Dist.] April 18, 2006)(Murphy)
AFFIRMED: Opinion by Judge Murphy
[at will employment and noncompete agreement, not valid and enforceable, no contemporaneous
consideration in exchange, denial of temporary injunction affirmed]
Before Judge Murphy, Justices Brock Yates and Guzman
14-05-01180-CV Morse Wholesale Paper Company v. Bill Talley
Appeal from 234th District Court of Harris County

Sheshunoff Mgmt Serv's v. Johnson, Strunk & Assoc . (Tex. Oct 20, 2006)(Willet)(noncompete agreement)

03-1050 ALEX SHESHUNOFF MANAGEMENT SERVICES, L.P. v. KENNETH JOHNSON AND STRUNK &
ASSOCIATES, L.P.; from Travis County; 3rd district (03-03-00060-CV, 124 SW3d 678, 10-02-03)
2 petitions
The Court reverses the court of appeals' judgment in part, affirms the court of appeals' judgment in part,
and remands the cause to the trial court.
Justice Willett delivered the opinion of the Court, joined by Justice Hecht, Justice Brister, Justice Green, and
Justice Johnson

In this case we revisit the Court’s 1994 decision in Light v. Centel Cellular Co.[1] and again consider the
enforceability of covenants not to compete in the context of at-will employment. The question today is
whether an at-will employee who signs a non-compete covenant is bound by that agreement if, at the time
the agreement is made, the employer has no corresponding enforceable obligation. Under Light, the answer
to that question was always “no.” Today we modify our holding in Light and hold that an at-will employee’s
non-compete covenant becomes enforceable when the employer performs the promises it made in
exchange for the covenant. In so holding, we disagree with language in Light stating that the Covenants Not
to Compete Act[2] requires the agreement containing the covenant to be enforceable the instant the
agreement is made.

Chief Justice Jefferson delivered a concurring opinion, joined by Justice O'Neill and Justice Medina
Justice Wainwright delivered a concurring opinion

Sheshunoff Mgmt Serv's v. Johnson, Strunk & Assoc. (Tex. Oct 20, 2006)(concurrence by Jefferson)

The Court’s holding permits an employer to enforce a non-compete covenant months or even years after
the employee signed it, as long as the employer eventually fulfills its side of the bargain. That sort of delay
is inconsistent with clear statutory language that the covenant must be enforceable “at the time the
agreement is made.” While I agree with the Court that “at the time” does not require an instantaneous
exchange of consideration, neither does the statute permit the employer’s promise to hang in the air,
indefinitely, until it “becomes enforceable” by performance. Rather, consistent with Light and with the
statute, I would hold that the employer’s exchange of consideration must occur within a reasonable time
after the agreement is made. Because that condition was satisfied on this record, I concur in the judgment.

Justice Wainwright delivered a concurring opinion

Sheshunoff Mgmt Serv's v. Johnson, Strunk & Assoc. (Tex. Oct 20, 2006)(concurrence by Wainwright)

Today, the Court modifies its interpretation in Light v. Centel Cellular Company of the Covenants Not to
Compete Act. See 883 S.W.2d 642 (Tex. 1994); Tex. Bus. & Com. Code §§ 15.50–.52. The at-will employee
in this case, Kenneth Johnson, asserted that a noncompete agreement was unenforceable under Light’s
construction of subsection 15.50(a) of the Act because no consideration was exchanged at the time the
parties entered into the agreement. Contrary to Light, the Court holds that Johnson became bound by his
promise not to compete when his employer later performed its corresponding promise to provide special
training in its business methods and confidential information. This is similar to a unilateral contract under the
common law and seems to address the Legislature’s purpose. I join most of the Court’s opinion.

Both the confidentiality agreement and the noncompete are part of Johnson’s employment agreement. I
would hold that the covenant not to compete is enforceable on the ground that it is ancillary to the otherwise
enforceable confidentiality agreement.

Matagorda County Hospital District v. Burwell (Tex. 2006)(Employment manual did not alter at-will
employment relationship, no protection against wrongful termination)

Ed Rachal Foundation v. D’Unger (Tex. April 21, 2006)(at will employment, no common law cause of action
for whistleblowing, Supreme Court reversed wrongful termination award, plaintiff takes nothing, court defers
to legislature to create remedy for whistle blowing)

Courts of Appeals Opinions [under construction]

Talford v. Columbia Medical Center at Lancaster Subsidiary, L.P., (Tex.App. - Dallas 2006)(employment at
will, withdrawal of offer, BoC)